Engaging Outside Firms Should Create Value, Not Drive Up Costs

Retaining outside counsel isn’t a question of if, but when, for corporations. Diverse matters, serial litigation, congressional inquiries, and complex legal issues demand the specialization and focus that only outside law firms provide.

Companies will typically retain multiple outside firms to deal with contract and regulatory challenges constantly changing across municipal, state, national, and regulatory bodies.

But retaining multiple firms can pose problems. Each firm has its own way of doing things—not just different practices and specialties, but also different tech stacks and workflows. Coordinating projects among disparate firms and subcontractors can dramatically slow down work. Costs can quickly spiral out of control because the legal department, as it works with multiple firms, can’t easily identify the bottlenecks and inefficiencies.

General counsel must focus on the legal and compliance data that outside firms need to drive better outcomes. Deploying a comprehensive, centralized e-discovery platform to manage data, workflows, and projects would be a good first step. The primary objective of this strategy would be to develop standardized, repeatable processes between the legal department and outside firms.

A Shared Platform

Modern e-discovery platforms can seamlessly issue legal holds, preserve data in place, and collect, process, and review data using powerful artificial intelligence tools. They can identify documents of privilege, relevance, and non-relevance much earlier in the litigation lifecycle and inform legal strategy before costs mount.

They can also create customized reports and manage data for sophisticated workflows spanning millions of documents and hundreds of users. These platforms can be easily integrated with the firm’s technology and configured to securely share tools and data sets those firms need to work efficiently.

Performance

Once they have centralized operations and data management, GCs will be in a better position to address workflow bottlenecks and cost drivers. With a single platform that manages e-discovery from start to finish, GCs can develop key performance indicators to monitor progress on projects, measure the efficiency of internal operations, and crucially measure the effectiveness of outside counsel.

For example, they can analyze the data to track fundamental metrics such as litigation success rates, responsiveness, turnaround time, and adherence to budget. They can measure the practicality and business relevance of legal advice provided by outside counsel by analyzing objectives and outcomes across multiple matters or evaluate deal efficiency and execution. They can also compare outside counsel spending levels against their industry peers by using benchmarking tools.

Sophisticated data-based tools allow legal departments to maintain strong situational awareness of outside counsel’s activities and ensure they consistently deliver effective work. The goal should be a trust-based partnership in which both parties share aligned incentives and mutual risks.

Alternative Fee Arrangements

Engaging outside firms should create value for the corporate client, not drive up costs. While outside firms traditionally charge billable hours for their services, legal departments have begun to explore alternative fee arrangements to increase transparency, make costs more predictable, and establish performance-based incentives for outside firms to meet certain objectives, such as coming in at or under budget or completing work on time.

AFAs are built, not born, requiring trust between the GC and the outside firm. Analyzing relevant data to identify recurring pain points, establish key metrics, and monitor progress on performance objectives—which can apply to individual projects or encompass multiple matters—can give both parties the factual basis they need to arrive at an acceptable, mutually beneficial agreement.

AFAs can include:

• No surprise billing: Require detailed budgets for major matters with prior approval for additional spending.
• Capped fees: Implement flat fees, success-based fees, or capped hourly rates to replace open-ended billing.
• Limited billing of routine tasks: Prohibit hourly billing for multiple attorneys attending calls or for first-year associates doing basic research.
• Flat-fee/fixed-fee billing: Establish preset fees for specific legal tasks.
• Blended fees: Establish an average billable hour charged regardless of which attorney handles the work.
• Success or performance incentives: Offer an additional payment above a predetermined amount to be paid out for specific, predetermined outcomes.
• Unbundled legal services: Outside counsel is paid for specific tasks while the GC handles more routine matters.
• Subscription: Payment is provided for ongoing services rather than work on a specific case.
  

The Bigger Picture

Clients expect outside counsel to play a role that goes beyond serving as their legal adviser. Modern legal service requires a multidisciplinary approach.

Outside counsel are now expected to contribute strategic thinking and refine their process management to mitigate risk and deliver timely and practical support to their clients. They must demonstrate that they add value, not only by offering sound legal advice but also by leveraging information technology in collaboration with clients to improve process, increase efficiency, and control costs. The result should be a strategic partnership that produces value greater than the sum of its parts.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Chris Kruse is Casepoint’s chief revenue officer and leads the government and corporate sales teams, drives growth, go-to-market transformation, and product innovation, and provides strategic advice to shareholders.

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